Workers transport truck tyres on a bullock cart at an used tyre market , in New Delhi. (Photographer:”Prashanth Vishwanathan/Bloomberg News)

India’s Longest Bull Run In The Making Is The Slowest

India’s benchmark index is on track for its longest bull run, but it’s also going to be the slowest.

Nifty 50’s latest bull rally—signified by at least a 20 percent jump—began in February 2016. The index has gained 66 percent in the past 38 months, returning lower gains than the previous six bull runs.

The current rally has been marked by volatility with the benchmark index tumbling on three occasions, the most recent being the 15 percent drop from highs of 11,760 in August 2018. The Nifty 50 has had 424 positive trading days, second only to the rally between December 2011 and March 2015 with 440 positive trading days before the benchmark tumbled 23 percent to enter the bear territory.

“Neither exports nor the capex cycle has fired over the last three years,” Saurabh Mukherjea, founder at Marcellus Investment Managers, said. “That in turn has meant that earnings-per-share growth for Nifty stays in single digit year after year, which retards the rally.”

Nifty 50 has on an average gained 1.76 percent every month during the current bull run, the lowest among all the previous such rallies.

Pankaj Murarka, chief investment officer at Renaissance Investment Managers, blamed it on lower earnings growth. India has witnessed an earning recession over the last decade, he said. “Earnings growth was more pronounced in 2004-2008 compared to the current scenario which is leading to a laboured upmove. The good thing is we are at the end of the this recession and FY20 will witness 20 percent growth.”

Heavyweights Drive Bull Run

While the Nifty is up 67 percent, the Nifty Midcap 100 and the Nifty Smallcap 100 have gained 56 percent and 50 percent, respectively. That indicates the surge has been driven by large-cap heavyweights.

Between 2011 and 2015, the heavyweights alone didn’t not propel the Nifty 50’s 98 percent jump. ITC Ltd. (8.3 weight), Infosys Ltd. (7.36 percent) and Reliance Industries Ltd. (7.5 percent) rose 45 percent, 96 percent and 32 percent, respectively, during the period, according to Bloomberg. By comparison, other constituents like Maruti Suzuki India Ltd., Mahindra & Mahindra Ltd., Tata Motors Ltd., Sun Pharmaceutical Industries Ltd. and Larsen & Toubro Ltd. rose 196 percent, 90 percent, 101 percent, 226 percent and 139 percent, respectively.

It was also a well-rounded surge with mid- and small-cap indices gaining 95 percent and 82 percent, respectively.

Similarly, in the rally that started in March 2009, among the top five weighted stocks —RIL, NTPC Ltd., Oil & Natural Gas Corporation Ltd., Bharti Airtel Ltd. and Infosys—only ONGC gained more than 100 percent. However, lower-weighted stocks like Tata Steel Ltd., State Bank of India Ltd., L&T, HDFC Ltd. and Hindalco Industries Ltd. surged 322 percent, 250 percent, 282 percent, 215 percent and 513 percent, respectively.